NZ teens face $10.80 an hour youth wage rate

Oct. 9
(BusinessDesk) - New Zealand teenagers face a lower wage
rate than the rest of the workforce for their first six
months in a job as the government seeks an antidote to high
youth unemployment.

Labour Minister Kate Wilkinson will
amend legislation to reintroduce a youth wage rate that's 80
percent of the minimum wage, she said in a statement today.
That equates to $10.80 an hour, or $432 before tax for a
40-hour week. From April next year, the 'Starting Out Wage'
will apply to 16- and 17-year-olds in the first six months
of a job, to 18- and 19-year-olds entering the workforce
after spending more than six months on a benefit, or 16 to
19-year-olds in a recognised industry training course.

"The new starting-out wage will help some of our youngest
and most inexperienced workers get a much-needed foot in the
door, in what is currently a tight labour market," Wilkinson
said. "The starting-out wage was one of National’s 2011
campaign promises, and designed to provide 16- to
19-year-olds with the opportunity to earn money, gain skills
and get the work experience they need."

New Zealand's
unemployment rate was at 6.8 percent across the whole
workforce at the end of June, but 13.1 percent for people
aged between 15 and 24.

The reintroduction of the youth
rate was part of a wider announcement by the government to
lift national productivity and encourage greater
participation in skilled industries such as engineering and
information technology.

In its Regulatory Impact
Statement, the Department of Labour, now part of the
Ministry of Business, Innovation and Employment, said the
changes may create a substitution effect where 16- and
17-year-olds become more attractive for employers than their
18- and 19-year-old counterparts, though it wasn't able to
predict the level of bias.

"The Ministry considers that on
balance, in the current economic environment, the proposed
starting out wage will have positive employment impacts for
the targeted groups," it said. "The Ministry cannot be
certain of the precise effects of the starting out wage
policy because a policy change of this type has not been
observed in New Zealand before."

If uptake for the new
measure is 30 percent of 16- and 17-year-olds seeking work,
the Ministry predicts they will substitute for jobs held by
18 and 19 year old workers, who would have 400 fewer jobs
available to them. However, a 50 percent uptake would see a
net addition of 1,100 jobs among 16 to 19 year olds.

The
department only consulted with other government agencies.
The Treasury said the 80 percent minimum wasn't necessary,
while the Ministry of Education warned it may impact on
students' ability to finance their current or future
tertiary studies.

MBIE said the government may want to
consider broadening the starting out wage to other groups of
workers who face barriers to the labour market in the
future.

Government officials are working with the
Ministry of Justice to assess whether the legislation is
consistent with the Bill of Rights Act relating to age and
employment status, and flagged the proposal may be at odds
with New Zealand's international obligations.

Opposition
parties flayed the move, with Labour Party leader David
Shearer saying a low wage future was "no future at
all."

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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